How is China's Low-Carbon Transformation Progressing?

China was responsible for 25 percent of global carbon dioxide emissions in 2012. According to World Bank research, cities consume more than 65 percent of global energy and emit some 70 percent of greenhouse gases. Transforming cities into ‘low-carbon cities’ will therefore be an important policy tool in mitigating climate change.

In early 2008, the Ministry of Construction of China and the World Wide Fund for Nature introduced ‘Low-Carbon City’ pilot schemes in Shanghai and Baoding in Hebei province. In 2010, the National Development and Reform Commission (NDRC) formally endorsed such schemes.

The main aims of the pilot programs are to develop low–carbon dioxide emission industries, establish a greenhouse gas emission data collection and management system and encourage residents to adopt green consumption patterns. In 2012, 36 cities were involved in the scheme.

So how effective have China’s low-carbon cities been?

To evaluate the performance of low-carbon cities, it is important to have a set of measureable indicators. We created a set of indicators that capture multiple dimensions of the performance of a low-carbon city based on the Stochastic Impact by Regression on Population, Affluence and Technology (STIRPAT) model.

Our evaluation framework includes five low-carbon city dimensions: economic growth, energy consumption, urban construction, government support and residential consumption. To measure these dimensions, 17 specific indicators were selected based on the STIRPAT model.

For our study, we selected five representative cities — Tianjin, Shenzhen, Hangzhou, Nanchang and Baoding — from the national pilot low-carbon city program and calculated their low-carbon city development index (LCCDI) score. Based on the calculated scores, we evaluated the level of low-carbon city development for five selected cities. This study revealed several key findings.

Low-carbon development and economic growth of a city do not form a ‘zero-sum’ relationship, but can be achieved simultaneously. Our study revealed that the levels of economic development and low-carbon development in the southern Chinese cities are higher than those in the central and northern cities. This implies that ‘low-carbon’ and ‘development’ can go hand-in-hand.

The overall level of low-carbon development of the five cities is not high, and has shown little apparent improvement over the period 2010–13. Among the five cities, only Shenzhen — one of China’s most economically advanced cities — has a relatively high level of low-carbon development, while the other four cities all present relatively low levels.

The level of low-carbon city development varies between regions and across the selected five dimensions. For example, Shenzhen has the highest overall level of low-carbon development among the five cities, but it scores the lowest for residential consumption. This suggests that cities may increase the level of low-carbon city development through targeted policies.

Based on these findings, how can China best promote the future development of low-carbon cities?

Energy saving and emissions reduction measures are the most important tasks for future low-carbon development and China’s urbanisation program. The key to realising energy savings and reducing emissions is to increase the efficiency of energy utilisation, adjust the energy structure, encourage related innovation and adoption and increase utilisation of less carbon-intensive energy sources. Renewable sources such as solar, wind and tidal energy are carbon-free and can directly reduce carbon dioxide emissions if they are substituted for non-renewable fossil fuel-based energy sources.

The key to increasing energy efficiency is to upgrade, develop and extend low-carbon technology in a time-efficient manner. Because China started developing low-carbon technology relatively late, its overall level of such technology is relatively low. Therefore, China should adopt and incorporate advanced low-carbon technology from abroad. This would help not only to reduce carbon dioxide emissions, but also to push forward innovation and the development of renewable energy technology, energy saving and emissions reduction technology, and clean coal technology.

The Chinese government can use subsidies, taxation and concessional financing to encourage enterprises through the research and development process or to introduce low-carbon technology. For high energy consumption industries such as transportation and construction, the government should further encourage enterprises to accelerate industrial structural adjustment and upgrading. China should also strengthen institutions and laws governing the low-carbon economy.

China should pay great attention to the development of strategic new industries. Of the seven strategic new industries promoted by the Chinese government, energy saving and environmentally friendly industries, new energy industries and the new energy car industry directly reflect the goal of low-carbon development.

Compared with traditional heavy manufacturing industries, other strategic new industries, such as the information and communications technology industry, are also resource-saving industries. As they develop, these strategic new industries will promote the upgrading of the local industrial structure and provide a clear direction for the future development of Chinese cities.

China should allow the market to allocate resources and promote low-carbon development under the umbrella of new urbanisation. It is important to gradually establish market-oriented low-carbon mechanisms — for example, through developing carbon emissions trading rights and carbon finance.

China has created carbon dioxide emission trading exchanges in Shenzhen, Tianjin, Guangzhou, Hubei and Chongqing as well as the Beijing environment exchange and Shanghai environment and energy exchange. However, the carbon trading quantity of these exchanges remains very low compared with those of developed countries in Europe and North America. The operation mechanism also needs to be improved.

Raising public awareness and encouraging low-carbon consumption are also crucial for low-carbon city development. Currently, residents’ poor understanding of low-carbon behaviour is hindering low-carbon city development. The government should make great efforts to encourage the public to gradually adopt a low-carbon consumption lifestyle, thus contributing to low-carbon and sustainable city development.

Chancellor of the Exchequer of the United Kingdom from 1992 to 2007. Prime Minister of the UK between 2007 and 2010. Inaugural 'Distinguished Leader in Residence' at New York University. Advisor at World Economic Forum

Dr Steinbock is an internationally recognized expert of the multipolar world. He focuses on international business, international relations, investment and risk among all major advanced economies and large emerging economies. In addition to advisory activities (www.differencegroup.net), he is affiliated with India China and America Institute (USA), Shanghai Institutes for International Studies (China) and EU Center (Singapore). For more, please see http://www.differencegroup.net/. Research Director of International Business at India China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore).